Agricultural Price Policy, Output, and Farm Profitability in India

Abstract

The formulation of agricultural price policy is complicated by the multiplicity of functions that price performs. The objectives, thrust, and instruments of agricultural price policy in India have undergone conspicuous shifts during the past 50 years and so has the role and effectiveness of price policy as a tool to influence the agricultural economy. The country’s post-reform period witnessed higher emphasis and dependence on price policy compared with previous decades, where price policy aimed only at maintaining a balance between the interests of consumers and producers. It is in this context that the paper examines the effectiveness of procurement prices in getting sufficient income to the farmers. An in-depth analysis of costs and returns was conducted for wheat and paddy, the crops offered the highest protection by the state, to get idea of the profitability of Indian agriculture and gain insights into the workings of the price policy.